What Documents Are Required to Apply for a Short-term Business Loan?

What Documents Are Required to Apply for a Short-term Business Loan?

Businesses often need money to handle unexpected expenses or to get help with cash shortages. And short-term business loans have always emerged as a helping hand to support enterprises in such situations.

These loans offer quick disbursal of funds to cover immediate financial needs and bridge temporary cash crunches.

To apply for these loans, you must fill out application forms and provide certain documents about your company to the loan provider. Being aware of the specific documents required for a business loan and having them prepared beforehand will make the application process go more smoothly.

Look at the common documents you should have ready before applying for a business loan.

What is a Short-term Business Loan? 

A short-term business loan is a quick access to funds provided to a business for a relatively short period of time. As the name suggests, short-term loans are not given for a longer duration but must be returned within the given period. The interest on these loans varies from lender to lender. 

The loan provider decides the Equated Monthly Installment (EMI) tenure as per the borrower’s income and capacity for repayment.

The three types of short-term loans provided by lenders are: 

  • Trade Credit
  • Bank Overdraft
  • Demand Loans

Documents Required for Business Loan 

Business loan documents required for quick approval include:

Identity Proof For a firm or an individual- a valid identity proof like Pan Card is required
Updated Business Plan A written document that describes your company
Bank Statement  Last few statements of your company’s transactions
Income Documents Company’s Income Statement 
Business Tax Statement  Recent Tax Return Information 
Proof of Continuation  Trade license/ ITR
Additional Document Sole Proprietorship Declaration or Certified copy of partnership deed

The above list is just a basic idea of the documents required for a business loan. To get instant loans with lower interest rates, it is important to understand the application process, the necessary documentation, and what steps to take. Read on for a detailed guide.

  • Identity Proof

You must provide proof of your identity to apply for a short-term business loan. This will be a valid government-issued identification document like a Pan Card, Passport, or Driving license. It helps the lender verify that you are an honest applicant.

  • Updated Business Plan

Having an updated business plan is important for a loan application. A business plan outlines the company’s upcoming goals, strategies, and financial projections. This document shows the lender that you have a clear vision for your business and a prepared plan for loan repayment.

However, be realistic while writing a business plan. Don’t mention massive profits, which may sound unrealistic and lead to loan application denial. It is always suggested to mention honest and real information for instant loan approval.

  • Bank Statement

It is the most important document required for loan approval. A bank statement records your company’s financial transactions and shows your account balances. Submission of this document helps the lender understand whether you will be able to make repayments on time or not.

Always provide recent bank statements that give on-time and clear insight into your cash flow, revenue, and overall financial stability.

  • Income Documents

Income documents provide an overview of your company’s earnings and expenses. Spending more than what your company makes will leave a bad impression and lead to disapproval of the loan. Hence, it is suggested that you keep track of your spending.

Through these documents, the lender assesses your capability to generate enough income for loan repayment. They’ll also ensure that your income is sufficient to handle payments on a new loan.

  • Business Tax Statement

Your business tax statements, such as income tax returns, show your company’s tax obligations. Loan lenders always request these statements to verify your financial standing and assess your ability to handle debt burdens.

  • Proof of Continuation

This document confirms the ongoing existence of your business. It can include business licenses, permits, or renewal documents that show your commitment to sustaining your company’s operations.

  • Additional Document

Depending on the business loan provider’s requirements, some lenders may request that you provide additional documents specific to your loan application. These documents include contracts, invoices, property agreements, or other relevant information related to your business finances.

Wrapping Up 

By providing such necessary documents and transparent and realistic business plans, businesses can easily get the help they need. When applying for a short-term loan, honestly present your credibility, financial stability, and plans to repay the loan.

To get more details on how to apply for a short-term business loan, contact IIFL Finance.